Wellness Plan Cash Treated as Wages, IRS Says

Cash benefits paid under an employer-provided self-funded health plan are included in the employees’ income and wages where amounts received for participating in health-related activities predictably exceed their after-tax contributions, according to an IRS chief counsel advice memorandum.

The exclusion from gross income under tax code Section 104(a)(3) doesn’t apply because such a plan doesn’t involve insurance risk, and therefore isn’t insurance for federal income tax purposes, the Office of Chief Counsel said in CCA 201719025, released May 12.

The Internal Revenue Service office said promoters selling the plans to employers claim the benefits don’t constitute income or wages ...